How we got here

Only you can estimate how much income you’ll need each year in retirement. Do you expect your expenses to be greater than they are now — because, for example, you have big retirement travel plans — or do you expect to scale back your spending? If you’re not sure, aim to replace between 70% and 90% of your pre-retirement income, which is the average income for the ten years leading up to retirement.

Be sure to adjust the numbers based on your retirement plans. For instance, if you know you won’t have a mortgage, you can plan to replace only 60%. If you want to travel every year, you might aim to replace 100%, or even 110%, of your pre-retirement savings.

If you anticipate receiving Social Security benefits, you can estimate replacing 70% of your pre-retirement income. Use this calculator to estimate how much you can expect to receive from Social Security.

Our calculations then use your estimated retirement income needs to determine the how much you should aim to have saved in today’s dollars, based on yearly distributions of 4% of your portfolio. This is a rule of thumb that holds that retirees can withdraw 4% (adjusted for inflation) from their investment portfolios each year and never run out of money.

We factor in a 2% inflation rate and a baseline salary increase of 2% per year to offset inflation. Be sure to take your specific industry’s wage trends into consideration, and use your past rate of salary increases as a guide.

Future earnings factor into your retirement calculation because as you earn more, you can presumably save more — but you may also raise your standard of living, which can carry over into retirement.

How much should you save? Experts recommend saving 10% to 20% of your income each year — but if your employer contributes matching dollars to your retirement plan, they count toward that contribution percentage. Work your way up to that goal by increasing your contributions by 1% or 2% each year.

One painless trick to save more: Bump up your retirement savings contributions each time you get a raise. It’s a great way to sock more money away and limit lifestyle inflation.

Our calculator predicts your retirement nest egg based on your retirement income needs, current and future earnings, your savings rate and return. The return you can expect to see on your retirement investments varies based on the aggressiveness of your portfolio. We’ve used an average rate of return of 6% and assume a 5% return rate in retirement assuming a more conservative portfolio.

How much money do you need to retire?

The typical advice is that you should aim to replace 70% to 90% of your annual pre-retirement income through savings and Social Security. For example, a retiree who earns an average of $63,000 per year before retirement should expect to need $44,000 to $57,000 per year in retirement. Use our retirement calculator to figure out how much you need to save for your retirement.

Using this retirement calculator

Adjust your savings rate to find out how much you should put away to meet your monthly spending needs in retirement.

Adjust your retirement age to see how working a bit longer can make up for saving less. Keep in mind that while many of today’s retirees work well past standard retirement age, you might not be able to.

In the advanced fields, you can customize your projected life expectancy, annual portfolio return and the rate of inflation. NerdWallet recommends using an annual inflation rate of 2% and an average annual return of 6% pre-retirement. This assumes a portfolio of 80% equities and 20% fixed income.

Estimating your retirement needs

Your retirement savings goal hinges on a few factors, most notably how much you think you’ll spend in retirement. To estimate that, think about how your current spending might change. For example, you might have your mortgage paid off by then, but your travel spending could increase.

Consider, too, that you’ll no longer have to save for retirement — you’ll be in retirement — so you can reduce your income needs by the amount you’re saving. That means if you’re currently saving the recommended 15% of your income, you can live on 85% of your income in retirement with no changes to how you spend. Social Security can adjust that down even further. You can use this calculator to estimate how much of your income Social Security will replace.

Adjusting your spending needs

The calculator defaults to the assumption that you’ll spend a little less than you spend now. That means you plan to scale back your spending just slightly in retirement, and your goal should be to replace about 80% of your pre-retirement income, minus your current savings rate. The calculator doesn’t factor in income you’ll receive from Social Security, but you should plan to use Social Security income to help meet that 80%.

For example, if you save 15% of your income and elect to spend at NerdWallet’s assumed rate of 20% less than you do pre-retirement, the calculator will show you how much you need to save to replace 65% of your current income. If that’s not your plan — you think you’ll cut spending even further, or you want the flexibility to spend more — you can adjust your spending levels. Here are the alternatives:

You can elect to spend even less in retirement, which gives you a goal of replacing about 70% of your pre-retirement income, minus your current savings rate. We recommend selecting this option if you’d like to plan for Social Security.

You can choose to keep your spending the same in retirement, which will adjust your goal to replace roughly 100% of your current income, minus the percentage you’re currently saving.

On the other hand, if you think you want to spend more in retirement, you’ll receive a goal that replaces 110% of your pre-retirement income, minus the amount you’re currently allocating to savings.

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